As my friends will tell you, I like walking through malls, looking at the traffic and trying to figure out who’s going to stay in business. I marvel that here I am in another Home Depot with another just down the street and a Lowe’s around the corner. How do they do it, I used to ask? Now I ask an even better question: why?
Do you remember what caused the financial meltdown of 2008? Boston Fed President Eric Rosengren said it last week with elegant simplicity: the “significant decline in collateral values” of both commercial and residential real estate was “the root cause of the financial crisis,” he said. When real estate values fell below the value of the debt pledged against them, the shortfall blew a huge hole in bank balance sheets. As the banks struggled to cope, they stopped lending to their customers and themselves and the system crashed due to a liquidity crisis.
Here we are on July 4, fire cracker day, when we get to celebrate America’s beginnings…a good time to go back to basics.
The market-leading Nasdaq stocks have had a hard week. The FAANG stocks fell again on Friday and once again failed to top the highs of early June before the epic smash of June 9. Have we seen the top?
Since last year, I have been telling my readers that a resolution of Europe’s banking woes was coming and that it would be one set of rules for Italy and another set of rules for the rest of the EU. Now, finally, we hear it is.
As you know, we watch credit markets closely. In an economy completely dependent upon credit growth to keep from falling into a recession, a credit slowdown is not good news. Here is the latest data:
So, today Amazon announced it is buying Whole Foods for $13 billion. What’s supposed to happen in a deal like this is the acquirer’s stock (Amazon) goes down and other food company stocks go up in anticipation that more takeovers will follow.
I am often asked why I think that central banks can’t prevent a collapse in the financial system. Surely they can keep the game going, most people think. Just keep interest rates low and print lots of money.
By now you probably know that the US government’s May jobs report released last Friday hugely missed expectations. Only 138,000 jobs were added in May while the previously reported March and April estimates were revised lower by 66,000.
March and April auto sales data were very poor, as reported here. Would we see a bounce back in May? Not a chance. Auto sales declined for the fifth straight month with domestic light vehicles annualizing 12.59 million vehicles, the lowest sales number going back more than three years, despite record incentives and discounts to rental and other fleet customers. Even worse, inventories continued to grow.